Sunnyvale, CA -- (ReleaseWire) -- 05/22/2012 --The Brazilian Government has introduced new amendments to the regulations on financial transactions tax (IOF) imposed on foreign exchange transaction with effect from March 1, 2012.

As per the new ruling, direct foreign loan transactions and transactions involving bonds issued to the international market with a minimum average term of less than three years will be subject to 6% IOF. Also, the new average term will be applicable to a transaction contracted through concurrent foreign exchange transactions.

However, IOF on the settlement of such loan transactions will remain the same and no IOF will be levied upon liquidation of foreign exchange transactions contracted for the purpose of investments in Brazilian Depositary Receipts (BDR).

Amendments to Taxation of Financial Transactions Levied on Derivative Agreements

In a separate announcement, the Brazil government introduced amendments to the rules which levy a financial transaction tax (Imposto sobre Operações Financeiras - IOF) on derivative agreements.

Effective from March 15, 2012, there would be no IOF on hedge transactions by an exporter (resident individual or legal entity) provided the following conditions are met:

- Daily total foreign exchange exposure amount must not surpass 1.2 times of the total amount of the exports in the year before.
- The export transactions must justify the foreign exchange exposure within 12 months from the date the OF is due.

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